Ted Baker shares plunge as retailer warns of lower profit

(Reuters) - Ted Baker shares plunged as much as 18 percent on Wednesday after the British fashion retailer said 2018-19 earnings would miss forecasts due to volatile exchange rates, higher costs and a writedown on inventory.

The company, which said in December it was investigating allegations of misconduct against its founder and CEO Ray Kelvin, said it now expected pretax profit of about £63 million for the year ended Jan. 26.

That would be less than the £73.5 million reported the year before and well below Peel Hunt analysts’ forecast of £72.6 million.

At 0930 GMT, Ted Baker shares were down 13.1 percent at 1,738 pence, after touching a seven week low of 1,644 pence.

The stock fell more than 40 percent in 2018, as the company was hit by a long and harsh winter in Europe and North America, followed by an unusually hot summer.

It then announced in December an independent investigation into claims against Kelvin relating to his habit of hugging business colleagues.

Kelvin, who owns about 35 percent of Ted Baker and has been CEO since its launch in 1988, went on a leave of absence a few days later. He has not commented on the allegations, but the company said in December that hugs had become “part of Ted Baker’s culture” but were “absolutely not insisted upon.”

Ted Baker, which has more than 500 stores and concessions globally, said foreign exchange moves towards the end of its financial year had hit profits by about £2.5 million.

It also said it had identified “additional product costs” of about £2.5 million, and announced a £5 million writedown on the value of its inventory.

Hargreaves Lansdown analyst Laith Khalaf said the company had a “strong proposition appealing to those who are looking for an affordable luxury for a bit of individuality and indulgence, and that should set it in good stead for the long term, even if present conditions looks choppy.”

Ted Baker will announce full-year results on March 21.

Reporting by Sangameswaran S in Bengaluru; Editing by Bernard Orr and Mark Potter